State auditors find problems with specialty plates

$22 million for special programs lost, audit finds

UPDATED 7:03 PM PDT Apr 18, 2013

SACRAMENTO, Calif. -

State auditors reported significant problems on Thursday in how California agencies collect and spend money from certain specialty license plate funds, including the loss of more than $22 million in revenue that could have been used for programs to help veterans, college students, firefighters and others.

"These funds that are not being collected -- that is money that could be used to fund those activities," said Margarita Fernandez, of the California State Auditor's office.

The auditor also discovered that DMV officials "were collecting more in administrative fees than they should be."

Gov. Jerry Brown and lawmakers sought the audit after an investigation last year by The Associated Press.

In part, the AP found that money in a Sept. 11 memorial license plate fund that was intended to help victims' families and law enforcement had been diverted to other programs.

In addition, Brown and former Gov. Arnold Schwarzenegger diverted $3 million of the $15 million raised for the California Memorial Scholarship Program to help close the state's budget deficit and never paid the money back.

The report was the first audit in the 20-year history of California's specialty license plate program. It found accounting problems within the Department of Motor Vehicles and problems in how money has been spent.

California's specialty plates have raised more than $200 million during the years to benefit the arts, Olympic athletes and other causes ranging from the California coast to Yosemite National Park and Lake Tahoe.

More than 382,000 plates have been sold.

People who bought the plates were disappointed by the audit results.

"I kind of feel bad now that I didn't ask more questions about where the money was going," said Patricia Anderson, who paid $98 for a personalized plate reading "WE R 4US" when she lived in the San Francisco Bay area.

Her husband bought a second 9/11 memorial plate in the wake of the attacks.

"That was our way of expressing support. If it didn't go to what it was intended, then shame on those who asked us for our hard-earned money," Anderson said.

Tom Ikesaki, of Sacramento, also found fault with the DMV.

He purchased a specialty plate for his wife.

"They're not doing their job," Ikesaki told KCRA 3. "It's money that we could be using wisely for other things."

Auditors said the DMV failed to collect $22.2 million during the past two fiscal years alone because it undercharged some specialty plate owners, and improperly did not seek the fees on inactive plates.

The review also said the DMV overstated its costs by $6.3 million for administering the California Environmental License Plate Fund, while undercharging other specialty plate funds by $1.1 million in the past three fiscal years.

DMV officials would not comment on camera Thursday, but issued a statement to KCRA 3.

"DMV has generally not continued collecting fees from people who kept a personalized plate after they no longer have it on their car," wrote Armando Botello, from the DMV Office of Public Affairs, in an email. "DMV will do an analysis to determine whether it makes financial sense to change this practice. As for the other fees, DMV has developed plans to take corrective action."

The audit also cited a number of spending problems: The California Emergency Management Agency overcharged for administering the Anti-Terrorism Fund and spent some of the proceeds on programs not allowed by state law.

For instance, auditors said it did not monitor whether the California Fire Fighter Joint Apprenticeship Committee actually provided training required under a $2.5 million contract.

-- The Department of Food and Agriculture could not show that $896,000 in administrative expenses paid for out of the same fund actually involved anti-terrorism activities. It also did not properly administer contracts paid for with money from the fund.

-- The Department of Parks and Recreation could not justify all the administrative costs it charged to the environmental fund.

-- The Natural Resources Agency failed to submit required reports.

-- The California Victim Compensation and Government Claims Board failed to identify and notify people eligible for a scholarship program funded by the plates.The agencies generally agreed with the auditors' findings and recommendations for improvements.

However, DMV cited limits in its database and unclear state laws that make it difficult to collect some funds.

The Food and Agriculture and Emergency Management agencies, Parks and Recreation department, and the Victim Compensation board all said they will do a better job tracking the spending of money generated by the plates.

In particular, the audit cited the Department of Food Agriculture for using special license plate funds on salaries, software and building costs, instead of anti-terrorism.

In a statement to KCRA 3, Steve Lyle, of the Department of Food and Agriculture wrote, "CDFA is already at work initiating the changes it committed to in response for the audit report. The program utilizing this funding is critical in preparation for potential bioterrorism. Multiple threat assessments ran an intentional contamination of milk and the intentional introduction of several rapidly spreading animal or livestock viruses, such as foot and mouth disease, as top bioterrorism concerns. CDFA has used the funding for personal protection for first responders to a bioterrorism event, an upgrade to its IT system to enable the real time situational awareness for a more effective response to a terrorism event, and for inter-agency coordination, training and exercises related to terrorism preparedness."

The Natural Resources Agency disagreed with the findings, though auditors said the agency was misinterpreting its recommendations.

The AP's initial report focused on the memorial license plate created after the Sept. 11, 2001, attacks and emblazoned with the words, "We Will Never Forget."

The AP found that millions of dollars raised by selling the plates had been spent on such issues as livestock diseases and workplace safety - items with questionable links to threats of terrorism.

Some of the $1.5 million raised annually by selling those plates was supposed to fund scholarships for children of California residents who died in the attacks.

The AP found the DMV was advertising the plates as benefiting those children seven years after the department stopped funding the program.

KCRA 3's Mike Luery contributed to this report.

Copyright 2013 by KCRA.com. The Associated Press contributed to this report. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.